Document Type

Article

Publication Date

10-3-2025

Comments

This article is the author’s final published version in Risks, Volume 13, Issue 10, 2025, Article number 193.

The published version is available at https://doi.org/10.3390/risks13100193. Copyright © 2025 by the authors.

Abstract

This study investigates whether publicly listed cannabis shares provide enough risk-adjusted returns to warrant their incorporation into diversified portfolios. An equally weighted portfolio of cannabis companies is constructed using monthly data from January 2015 to December 2024. Risk-adjusted performance is assessed using the Sharpe, Sortino, and Omega ratios and compared to the Russell 3000 Index and the FTSE All-World ex-US Index. In addition, we estimate both unconditional and conditional Fama–French five-factor model enhanced by momentum. The findings indicate that cannabis stocks persistently underperform U.S. and global benchmarks in both absolute and risk-adjusted metrics. Downside risk is elevated because cannabis portfolios exhibit much higher value at risk (VaR) and conditional value at risk (CVaR) than broad indices, especially after COVID-19. The findings show that cannabis stocks are quite volatile and fail to generate significant returns on a risk-adjusted basis. The study highlights the sector’s structural vulnerabilities and cautions investors, portfolio managers, and regulators against treating cannabis shares as dependable long-term investments.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.

Language

English

Download

Share

COinS